Lakeland Industries, Inc. (LAKE) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
Despite a 29% increase in net sales and promising growth from acquisitions, the company faces several challenges. Increased operating expenses, currency issues, and a significant net loss suggest financial instability. The Q&A revealed management's unclear responses on key issues like inventory and EBITDA improvements. While there is optimism around growth opportunities, the lack of a share repurchase program and decreased gross profit margin are concerning. These factors, combined with the negative impact of increased debt and economic uncertainties, suggest a negative stock price movement in the short term.
Key Financial Performance
Net Sales $46.7 million, a 29% increase year-over-year driven by a 100% increase in fire services products and ongoing momentum from recent acquisitions.
Gross Profit Margin 33.5%, decreased from 44.6% year-over-year due to robust growth in fire services offset by weakness in Canada and Latin America, and lower margins from recent acquisitions.
Adjusted EBITDA (excluding FX) $0.6 million, a decrease of $3.2 million or 84% year-over-year, primarily due to materials purchase variance and higher organic SG&A.
Operating Expenses $20.3 million, an increase of $6.3 million or 45% year-over-year, primarily due to inorganic growth, acquisition expenses, and higher organic operating expenses.
Net Loss $3.9 million or $0.41 per share, compared to net income of $1.7 million or $0.22 per share for the same period last year.
Cash and Cash Equivalents $18.6 million, up from $17.5 million as of January 31, 2025.
Long-term Debt $24.7 million, increased from $16.4 million as of January 31, 2025.
Inventory $85.8 million, up from $82.7 million at the end of Q4 fiscal 2025, due to inventory buildup for anticipated sales increases and tariff mitigation.
Organic Revenue Growth $36.9 million, a 2% increase year-over-year, driven by strong growth in the U.S. and Europe, partially offset by weakness in Latin America and Canada.
Trailing 12-month Revenue $177.6 million, an increase of $45.3 million or 34% year-over-year.
Organic Gross Margin Percentage 35.9%, decreased from 44.6% year-over-year, primarily due to lower sales in higher-margin regions and material price variance allocations.
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Operating Highlights
Fire Services Products Growth: Achieved a 100% increase in fire services products, contributing significantly to record net sales.
New ERP System Implementation: Invested $1.2 million in a new SAP ERP system to enhance operational efficiency.
U.S. Market Growth: Net sales in the U.S. increased 42% year-over-year to $22.5 million.
European Market Growth: Net sales in Europe increased 102% year-over-year to $12.1 million.
Tariff Mitigation Strategies: Implemented strategies to mitigate tariff impacts, including inventory buildup and cross-certification of products.
Operational Efficiency Focus: Focusing on operational efficiencies to achieve higher margins and reduce operating expenses.
Inventory Management: Increased net inventories by $3.1 million to $85.8 million as part of tariff mitigation.
Acquisition Strategy: Maintaining a robust M&A pipeline with active discussions for further consolidation in the fire market.
Long-term Growth Strategy: Aiming for accelerated growth through cost discipline, targeted acquisitions, and operational enhancements.
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Risk or Challenges
Tariff Uncertainty: The company is facing tariff uncertainty which has caused regional delays in sales, particularly in Canada and Latin America, two higher-margin geographies. This uncertainty has necessitated mitigation strategies, including building inventory.
Supply Chain Challenges: Despite a diversified manufacturing footprint that allows for adaptation to shifting trade dynamics, the company has experienced lower sales in Canada and delays in expected sales in Latin America due to tariff-related issues.
Gross Margin Pressure: Gross profit as a percentage of net sales decreased from 44.6% to 33.5% year-over-year, primarily due to lower margins from recent acquisitions and a shift in geographic revenue mix.
Increased Operating Expenses: Operating expenses increased by $6.3 million or 45% year-over-year, driven by acquisition-related costs, severance, litigation expenses, and higher organic operating expenses.
Currency Issues: The company has encountered currency issues that have affected revenue, particularly in high-margin regions.
Economic Factors: The company is not entirely insulated from global economic uncertainties, which may impact future performance.
Integration of Acquisitions: The integration of four major acquisitions completed in the past year is expected to take time, and the benefits may not be immediately reflected in financial performance.
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Guidance & Outlook
Revenue Growth Strategy: Focus on accelerating growth within the fragmented $2 billion fire protection sector in the largest global markets.
Acquisition Strategy: Maintain a robust M&A pipeline and engage in active discussions to explore new opportunities for consolidating the fragmented fire market.
Operational Efficiency: Implementing operating and manufacturing efficiencies to achieve higher margins.
Tariff Mitigation: Employing strategies to mitigate the effects of potential imposed tariffs, including inventory build-up and cross-certification of products.
ERP System Implementation: Investing in a new SAP ERP system to enhance and modernize company-wide systems.
Revenue Guidance: Expected revenue between $210 million to $220 million for fiscal year 2026.
Adjusted EBITDA Guidance: Adjusted EBITDA, excluding FX, trending toward the lower end of the guidance range of $24 million to $29 million.
Long-term Growth Outlook: Anticipate steady expansion in EBITDA margins into the mid- to high teens range over the next 3 to 5 years.
Market Recovery Outlook: Expect revenue momentum to rebound in Canada and Latin America once tariff uncertainties subside.
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Shareholder Return Plan
Share Repurchase Program: None
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Key Q&A
Q:Could you give a little bit more detail as to how much of a headwind that was this quarter and what we -- how the next couple of quarters are going to develop?
A:The total increase to manufacturing cost was close to $3 million impact to adjusted EBITDA, with a significant part relating to purchase variance into COGS rather than being capitalized into inventory. The impact was about a 1% impact to gross margins.
Q:What about on the OpEx side? Anything in there that is onetime or we can adjust?
A:Travel expenses were up considerably in Q1, and we expect those to back off. We identified $4 million in costs that we're focusing on for potential cost cutting.
Q:Can you maybe give us a little detail of how things are going on the growth side?
A:We're seeing much greater engagement with customers and opportunities, particularly with the Veridian acquisition. We're seeing growth in various markets, including a new opportunity with the Korean fire department.
Q:Can you update us on your expectations for organic growth for the full year?
A:We saw strong organic growth in the U.S., almost 10% growth in industrial and fire products, but there was a drop-off in LatAm and Canada.
Q:Does the Jolly order need to be shipped during the year to reach your full year goal?
A:The Jolly order is an important component of our forecast, but we remain optimistic about its delivery.
Q:Does the EBITDA completely reverse in 2Q?
A:We expect an improvement in the second quarter, but it will not all reverse completely.
Q:What is your comfort level with where inventories are?
A:We positioned ourselves well for inventory from China and Vietnam, and we expect to see inventory work down.
Q:Can you break out the organic headwinds affecting gross margin?
A:The systems challenge with pricing and increased number of suppliers has impacted gross margins, along with the purchase accounting and profit in inventory.
Q:Are there opportunities to cut SG&A in acquired companies?
A:Yes, there are opportunities for efficiencies and consolidations within the acquired companies.
Q:Review of Unclear Management Responses
A:Management avoided giving a direct answer regarding the specific timing of the Jolly order delivery and the exact impact of the inventory build on future sales. Additionally, there was vague language around the expected improvements in EBITDA and the specific measures being taken to address gross margin challenges.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Canada Latin
FX decrease
LLC Research
Latin America
Research Division
Veridian
accounting margin
allocation system
business amortization
capital investment
cost
freight business
loss
margin market
margin percentage
material purchase
mitigation strategy
mix business
opportunity fire
outlook
price variance
purchase accounting
purchase variance
quarter margin
sale Europe
shipment timing
tariff delay
tariff uncertainty
uncertainty tariff
variance SGA
variance allocation
LAKE Transcript
Lakeland Industries, Inc. (LAKE) Q3 2026 Earnings Call Transcript
Unknown12-9
The earnings call highlights significant challenges, including a net loss of $16 million, certification delays, and slow tender conversion, leading to lower performance in key regions. Despite some positive aspects like revenue growth in fire services, these are overshadowed by broader issues. The Q&A reveals further concerns about tariffs, certification delays, and competitive pressures, with management providing limited clarity on resolution strategies. The company's guidance points to the lower end of revenue expectations, and with no new partnerships or strong guidance, the overall sentiment is negative, suggesting a potential stock price decline.
Lakeland Industries, Inc. (LAKE) Q2 2026 Earnings Call Transcript
Positive9-10
The earnings report shows strong financial performance with significant revenue and EBITDA growth, despite challenges like tariffs affecting margins. The Q&A reveals management's optimism for future growth through M&A and operational efficiency improvements. While there are concerns about inventory levels and tariff impacts, the company's strategies to mitigate these issues, along with expected recovery in Latin America, suggest a positive outlook. The positive sentiment is further supported by management's focus on cost savings and strategic expansions.
Lakeland Industries, Inc. (LAKE) Q1 2026 Earnings Call Transcript
Unknown6-10
Despite a 29% increase in net sales and promising growth from acquisitions, the company faces several challenges. Increased operating expenses, currency issues, and a significant net loss suggest financial instability. The Q&A revealed management's unclear responses on key issues like inventory and EBITDA improvements. While there is optimism around growth opportunities, the lack of a share repurchase program and decreased gross profit margin are concerning. These factors, combined with the negative impact of increased debt and economic uncertainties, suggest a negative stock price movement in the short term.
Lakeland Industries, Inc. (NASDAQ:LAKE) Q4 2025 Earnings Call Transcript
Positive4-12
The earnings call highlights strong financial performance with a 49.3% revenue increase in Q4 2025 and improved gross margins. Although there are concerns about net losses due to impairments, optimistic future revenue and EBITDA guidance, strategic acquisitions, and a focus on operational efficiency provide a positive outlook. The Q&A session revealed management's confidence in maintaining guidance and addressing challenges. Despite some unclear responses, the overall sentiment is positive, likely leading to a stock price increase of 2% to 8%.
LAKE Slides
LAKE Report
Frequently Asked Questions
Where does this earnings call transcript come from?
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Who creates the AI Summary and Key Q&A highlights shown above the transcript?
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
